Nearly half of SA’s workforce estimated to have no retirement plan

About 41% of economically active South Africans are estimated not to have any retirement plan in place, according to a survey by 10X Investments.

It defines “economically active” people as those with a monthly income of more than R7 600.

The survey went out to over a million South Africans and, according to 10X, this serves as a representation of the 11.9 million economically active South Africans in the country.

The survey estimates that more than 40% of economically active women across all demographics have no investments or savings in any form.

Crisis coming

About 46% of the 1.4 million respondents to the survey indicated a “profound” lack of trust in the retirement industry.

The report points out that SA is sitting on a retirement timebomb, with only 6% of the country’s population on track to retire comfortably, according to National Treasury.

“There is no evidence to suggest that the crisis in retirement planning in the country has improved at all in the last 20 years,” states the report.

The report found a lack of understanding among many existing clients of the retirement industry of what they have saved and what they need to have saved.

Fewer than 50% of the respondents were aware of how much money they could expect at retirement.

The survey found that 46% of respondents began planning for retirement only after becoming established with partners or having children, while just 22% began planning at the beginning of their careers, which is what is recommended.

Founder and CEO of 10X Investments Steven Nathan says many people only discover that their retirement products have performed poorly when it is too late.

Gender gap

He said the survey results point to the gender pay gap in SA, where women are understood to earn around a quarter less than their male counterparts. This has a knock-on effect on retirement savings.

The report also noted that the gender pay disparity is often exacerbated by the increased likelihood that women’s careers will be interrupted during pregnancy and child-rearing.

A mere 16% of the women respondents reported investing their savings to grow their wealth.

The report concludes that just putting money aside is not enough in a high-inflation environment like South Africa. Saving money in a traditional bank account in this type of environment means your money is actually shrinking, and that in the future it will be able to buy less than it would today.

The report, therefore, highlights the fact that a big contributor to South Africa’s retirement crisis is lack of understanding of key concepts, such as the need for retirement savings to keep up with inflation.